The 'Provision for Bad Debts' is created by: MCQ with Answer and Explanation

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The 'Provision for Bad Debts' is created by:

A. Debiting Sales Account

B. Debiting Debtors Account

C. Crediting Cash Account

D. Debiting Profit & Loss Account and crediting Provision for Bad Debts

Answer: Option D

Solution (By JKSSB Mock Tests)

The adjusting entry: P&L A/c Dr. To Provision for Bad Debts.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

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What is the correct journal entry for depreciation charged on machinery?

A. Debit Depreciation A/c, Credit Cash A/c

B. Debit P&L A/c, Credit Machinery A/c

C. Debit Depreciation A/c, Credit Machinery A/c

D. Debit Machinery A/c, Credit Depreciation A/c

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Correct Answer: Option C

Explanation:
Depreciation is an expense (Debit), and it reduces the value of the asset, so Machinery Account is credited.

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Question #2

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The matching concept requires that:

A. Profits should match cash

B. Expenses should be matched with revenues of the same period

C. Debits equal credits

D. Assets should equal liabilities

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Correct Answer: Option B

Explanation:
Matching principle states that expenses incurred to earn revenues should be recognized in the same accounting period.

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Question #3

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The 'Throughput Accounting' emphasises:

A. Maximising production volume

B. Increasing fixed cost

C. Reducing labour cost

D. Maximising throughput (sales minus material cost) while minimising operating expenses and inventory

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Correct Answer: Option D

Explanation:
Throughput accounting is based on the Theory of Constraints.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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